How to protect your Paypal account

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Like a lot of people that do business online, I use Paypal every day for both sending and receiving money.  It’s really the easiest way to conduct business.  To receive payments from clients who wish to pay by credit card, I don’t need to have a merchant account – the money just goes directly to my Paypal account, and I can have it transferred directly into my bank (or get cash from any ATM).  To make a purchase, I pay with Paypal and the money either comes from my checking account (immediate transfer) or is charged to my credit card.  Simple!


Well, not always that simple.  Here is part of an email I received this week:

This week has been kind of a nightmare for me.  Both of my Paypal accounts have been shut down…Forever they tell me.

It was a form letter telling me that my account has been “limited”, and saying that this was a “result of a routine account review activity”.

I called the “contact us” number through my account and spoke a surprisingly friendly woman named Audrey, who assured me that this was nothing more than a standard review of my personal and business account.

Two days later I received a message that “my appeal has been denied”, my personal and business accounts had been terminated, and that they will be holding over $5000 of my money for the next 180 days.

Can you imagine the nightmare?  What if the money in your Paypal account was needed to pay your bills?  What if you needed that account to conduct your business?

I am putting this on my blog today to help you avoid being in that situation.

Garry Sayer, a respected internet marketer in the UK, has written a fantastic guide on how to protect your Paypal account.  It’s called Paypal Buddy: How to Stay on the Good Side of Paypal.

Paypal Buddy

I bought this guide and highly recommend it.  It’s something that you want to have handy if you should ever receive a notice like the one above.  You will learn not only certain things to do ahead of time to avoid a problem, but also exactly what actions to take if you should get an email from Paypal about a problem with your account.

The information is very inexpensive and could come in handy some day (and Garry offers a 60-day money back guarantee if you’re not happy with it).

Get your copy here

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Dick Miller
July 18th, 2011

It took me three tries go read your Monday tip today after the pop up forced me to sign up for this feed back mess. 🙁 keep up the good work.

Scott Johnson
July 18th, 2011

What was the pop up? I have set the newsletter signup to only show up once a year now, assuming you have cookies turned on.

Maurice Gilbert
July 18th, 2011

I question why anyone with an excellent credit record would subject themselves
to jumping through all the hoops that PayPal sometimes requires, instead of using a simple, routine, Visa/MC/etc.

With a high end limit on my Visa card, if I can’t purchase it with that, then I don’t need it that badly!

Scott Johnson
July 18th, 2011

Maurice – there are a few reasons why people prefer to use Paypal. Probably the biggest one is that when you use Paypal to make a purchase, the vendor never sees your credit card number or other information. Your number is only seen by Paypal, instead of dozens or hundreds of different vendors from whom you make purchases.

From a vendor’s standpoint, it is extremely easy to get a Paypal account and be able to accept credit cards, whereas a regular merchant account is more difficult to qualify for (and more expensive in most cases).

Larry O'Grady
July 19th, 2011

I’m not an internet merchant but I do a lot of shopping and e-bay buying and selling online and use PP for just the reason you mentioned Scott – no entering of sensitive numbers for each transaction. Also, PP is EASY to use whether buying or selling.

A lot of folks think their PP accounts are ‘safe’ because they ass-u-me PP is a bank. PP is NOT a bank and therefore does not have all the Federal banking rules and regulations and oversight to put up with and furthermore, they don’t WANT to be a bank (see above reasons). That should tell you something right there. Because they’re not a bank the internet abounds with PP horror stories such as the one you led off with.

Yes, I use PP regularly, BUT take safety precautions.

The personal ‘security measures’ I take with PP consists of keeping $1000 or less in my PP account and always immediately taking out all over that amount at an ATM. Also, the account is backed up by a savings account I started just for that purpose and that account NEVER exceeds $500.

THEREFORE: The MAXIMUM amount that PP can possibly tie up or suck out of my PP account and its backup is $1500, and most of the time it amounts to around $1000 or less total. That’s it. Just those two steps.

If you’re willing to protect your assets and accounts in this manner it will negate any further fancy arrangements might make.

DO NOT voluntarily give PP information to link to and access any personal account or credit line that you don’t personally limit. If you do, please see the above mentioned internet horror stories.

Linking your PP account to a Credit card with, say, a $10,000 (or more) limit or to your savings, checking or MM account with thousands in it is, in a word, FOOLISH!

Also, the above information is offered free of charge because I didn’t want to take the time to write a book and again, I do not depend on PP for any sort of sales/income. Anything I could add to the above advice would be just fluff and background information anyway.

I would think that Mr. Sayer’s book would be good to have if you were an online merchant, but not really needed for the average consumer/seller.

Would perhaps make a nice gift though…


Scott Johnson
July 19th, 2011

Good points Larry…but there are more factors to Paypal safety than just limiting the funds they can freeze. That is the value in the guide.

Bob Kilton
September 24th, 2011

Hi Scott. What is your view on Jobs on the internett? are they for real ?
Bob From Maine

Scott Johnson
September 24th, 2011

There are certainly some great ways to earn money from home on the internet. However, if you go searching Google for that kind of thing, just about everything that comes up will be a scam. If they ask for money up front, it’s not a job.